Transcript of the Ampleforth office hours on 28.07.2021
Simon:
What an exciting few weeks it’s been with the broad support from AAVE holders and the successful vote which made the aAMPL live! We have a lot of participants today from AMPL and Prometheus
Evan:
Thanks everyone for being present through the AAVE stuff, a huge step forward for crypto, whether they know it or not
Brandon:
We’re pretty excited about the Aave AMPL market going live this week. The demand for borrowing is a huge validator for this pool. Usually assets have the opposite problem — how to actually get any borrow volume at all. This shows how much promise there still is (once it’s fully uncorked).
We hit the max APY cap and hit 100% utilization rate very quickly. Right now we’re just trying to unlock that potential the best way we can with the APY proposal. Everything is pretty much ready to go there. We’re waiting on these PRs to make the AIPs official: — https://github.com/aave/aip/pull/91 — https://github.com/aave/aip/pull/92
Aalavandhan:
Rephrasing what Brandon said: Never before in DeFi has there existed a floating price token with naturally high borrower demand. AMPL is the first such asset. Cool to see.
Question 1:
When a podcast AMA?
Simon:
Hopefully this time next week- with the aAMPL going live we have been really busy. Would be great to get some of the exciting discussions around aAMPL out of written form and into that video/audio format so stay tuned.
Question 2:
How long will the APY extension process take to come to fruition?
Naguib:
The vote takes 3 days and 1 day of execution delay once the proposal goes online.
Question 3:
Any expectations of the APY max cap increase passing in Aave governance?
Aalavandhan:
I think the fact that AMPL is seeing a surge in borrow activity is a huge win for AAVE. Remember their reserve takes a cut of the borrow/lend interest spread. More interest means AAVE go up.
Question 4:
Any chance of the APY max cap increase vote starting soon?
Naguib:
Waiting on the AIP to be merged https://github.com/aave/aip/pull/91/
Question 5:
What were the biggest takeaways from launching on Aave?
Evan:
Hugely validating, in the sense that the demand to borrow is there.
Also really get the sense that AMPL on Aave will force a lot of people in DeFi to start thinking differently. There’s a big difference between us saying “this will happen when AMPL is on Aave” and folks seeing it happen with money on the line.
The stakes tend to facilitate hyper-learning (kinda like how everyone in crypto suddenly became an expert in art after the NFT boom lol).
There’s also this broader realization that I think people will eventually have, that demand to borrow (and leveraged trading) drives rapid growth. One of the biggest complaints I hear when Bitcoin is going sideways is that volume is low and there’s less demand to borrow, at which point people tend to wait around for the next “event” to speculate around, whether that’s elon on a podcast or some institutional news. If AMPL gets big enough, it could make some interesting waves on this front.
This is a useful diagram that positions us separately from stablecoins:
Question 6:
Wen Polygon AMPL bridge UI?
Aalavandhan:
I’m leaning toward building some sort of bridge abstraction layer on the UI end, which lets users send AMPL across any 2 chains and takes care of the bridge interaction logic under the hood. If we have something like this setup, integrating a new bridge should just be a fixed amount of work the same way it is with the smart contracts, ie) we just deploy AMPL and gateway contracts on a new chain and we’re live.
Question 7:
What is the cadence for BAL rewards now? It seems like it’s monthly?
Brandon:
GeyserV2 brings the BAL distribution back under the control of the users (where it really should be!), so you no longer need to wait on any particular group like us to make it happen.
Anyone in a Balancer V2-geyser can claim their own tokens to their vault at https://claim.balancer.fi/#/
We’ll keep distributing BAL tokens for the v1-geysers for near term, though
Question 8:
Are there any plans to incentivize lending on Aave?
Brandon:
We’ve always liked the idea of creating an aAMPL geyser. I think users would like this a lot as well. Before rolling this out though, we wanted to first observe the pool operating organically.
Follow-up question:
Would the rewards of an aAMPL geyser be split between borrowers and lenders?
Brandon:
It would go to the holders of aAMPL (meaning lenders)
Question 9:
I’ve was asked recently to explain the benefits of borrowing AMPL and the repayment process during a negative rebate (increase in AMPL; decrease in price initiating a supply contraction).
Since the borrowed-AMPL holder will have more AMPL during this period, they could essentially repay the loan and keep the remaining AMPL, correct?
Follow-up question:
So borrow → sell → wait for a negative rebase → buy back → return … (This sounds like shorting)?
Aalavandhan:
It’s subtly different. You’re shorting AMPL price not MC which by itself is unique.
Follow-up thoughts:
the combo of a low borrowing rate + high AMPL price will force a shorting … just like any other asset .. so not really worried about it.
Aalavandhan:
Actually people shorting AMPL price is actually good for the health of the system. It lets AMPL get back to the target faster.
People borrow when AMPL > 1, sell the ampl. When AMPL < 1, buy AMPL and repay ..
Question 10:
Aalavandhan mentioned in a tweet a couple weeks ago that Mark and Manny have been working on something that is currently under security audit. Are you able to give any updates/expand on this?
Mark:
This is the same product that we’ve alluded to in a few prior office hours! Fixed-rate, no liquidation lending application that supports AMPL natively :). The team is heads down building right now, should have something to show you all soon!
Question 11:
Will negative interest rates need to be a thing on Aave during negative rebases?
Evan:
We have this internal thought running around “demand to borrow cures all known problems”
Question 12:
When we get some alpha drops on the coming platform?
Mark:
Don’t have exact dates but coming soon and we will keep you all in the loop.
Question 13:
Is there an Aave community call tomorrow?
Aalavandhan:
https://twitter.com/AaveGrants/status/1420105859414302723?s=20
Question 14:
I’m just confused on why someone would borrow during negative rebase? Especially if you are borrowing to short price. Only reason I can see if they are confident price will spike back to positive rebase in the short term.
Aalavandhan:
Since they are just shorting price and price distribution is going to look something like this:
https://twitter.com/mrinconcruz/status/1419069696305860612?s=20
So if someone borrows ampl at 0.8 and sells what they are really betting on is that price goes to lower than 0.8c in the future so that can buy back, repay and profit.
Due to the cyclical nature in which ampl price moves it’s almost guaranteed that price will fall below 0.8c at some future point in time (if you wait long enough).
Follow-up thoughts:
That’s theory, but most likely they would get rekt by that new 10,002% assuming 100% utilization. I can see most losing and underwater due to interest.
Aalavandhan:
I don’t think we’ll ever get to 100% utilization after this (APY cap raise) change. The reason why it’s stuck at 100% right now imo is because we’re at a stalemate. Both lenders and borrowers are not budging.
Also the market needs time to understand what’s happening. When you borrow AMPL before a positive rebase and hold..you’re essentially taking a leveraged long position in AMPL. If you really want to do this you can just borrow USDC at a low APY and buy AMPL rather than paying a high APY on the AMPL pool .. I don’t think people have figured this out yet ..
That’s why I don’t buy the argument that utilization will be at 100% during expansion and 0% during contractions. Clearly it’s not that simple. The market just needs time to process how this works as it’s nothing like anything.
